Experience ’21: Day Two Highlights
Hello everyone, welcome to the second day of Experience ’21. It’s great to be with you again. I’m joined now by Fred Reichheld, and we’re going to have a discussion and go back and forth. It’s billed as a fireside chat, although Fred and I were just talking, it’s a beautiful day in San Francisco, what’s it like where you are in Cape Cod? It’s pretty hot in Cape Cod, I think we should have a tub of beer, not a fireside chat. A tub of beer at 8:58 a.m. Pacific time. Well, it’s almost noon here. It sounds good to me, let’s do that next time.
Engaging Discussion with Fred Reichheld
We’ve got a big audience here, A lot of people tuning in to hear from you, and so let’s get right to it, and let’s get into the discussion and make this a good use of everyone’s time. We’ve got our Q & A building up as well. So please in the chat, put your questions and keep things moving. But it’s great to see you again, Fred, you’re looking super. What a phenomenal 15 months, it’s been very challenging and tumultuous in our lifetime.
Exploring the Digital Future
One of the questions that’s come through already from one of our listeners watchers in the chat is: How do you think about the future? We’re going to get in deep into Net Promoter Score and beyond Net Promoter Score in this chat, which is actually the core of what we want to talk with you about. But if we start at a high level, do you think we’re going to see some digital burnout here and people craving human contact return to normal? Where’s the pendulum going to swing here? I think there’s gonna be a continued growth in digital experience. What we’re tired of and burned out with is lousy digital experience, which is a poor substitute for a human. Of course there’s going to be human and digital and an appropriate mix. But my expectation is we’re going to get better and better at digital that not just does an okay job, but actually lets you run your life better. Like this Zoom that we’re experiencing right now. No, I think people are burned out by a lot of living at home and taking care of kids and teaching their kids. But I think the train toward digital experiences that delight and are remarkable, that’s the future.
Navigating the Survey Landscape
No, I couldn’t agree more. I totally agree with that outlook, but it’s a fascinating time that we’re living through just across the world, all of our customers, how they have had to pivot. It’s been interesting to watch them pivot. At the same time, I think we’re seeing some leaders in companies – In times of stress, people revert to comfort norms, which aren’t always the right things, and I think what we’re seeing is this – Let’s talk about this whole issue of survey and survey technology and survey software and the survey philosophy, how do we think that that fits in the future? And are we taking all of the opportunities for executives to really engage and leverage digital technology in the feedback realm?
Adapting to Digital Challenges
One of the most frustrating things I’ve run into in the last year are people that I respect. For instance, Bain partners who say, Oh Fred, Net Promoter had a great run, but now we’re in a digital world so surveys are irrelevant. And I’ve just – I’ve obviously torn my hair out because it’s gone. Obviously you have tools to watch, click patterns and usage and so forth, but that really is not a substitute for the kind of structured conversation with a customer that surveys provide. And I don’t even like the word survey anymore, because surveys have been so abused by millions of people’s – Just sending out willy nilly billions of survey requests, when you have something important to talk about and you reach out to a customer and understand how did we do, and how could we do better? That is going to be needed forever. It just needs to be well integrated with the digital tools, and – But customers need a voice, you don’t want to just listen to what they say on message boards, Whoever that customer is. You need to have a structured conversation with the right customer at the right time. Yes. I mean I think these poorly crafted survey interactions that you talk about don’t really reveal the customer point of view, they deal with the voice of the vocal minority, don’t they? I think what we want to surface is this voice of the silent majority who feels there’s no channel in which they can be heard. Yeah, and you know that for me, the Net Promoter framework is essentially three questions. How likely is it you recommend us? And recommend is a – It’s a very important thing. Your co-branding, your own personal reputation. So when people take it seriously, they don’t mess around. When they give a 10, this is something special. And in some ways it’s an act of love, you know, you’re helping that person make the right choice and make their life better. And the second question is, can you tell us a little bit about why you feel that way? Why that score? And then the third question I’ve named after my daughter, Jenny, because she was the one that taught me, you should always ask: Is there anything we could do to make your experience better? And those three ideas are going to be true for 1000 years. Whether they’re asked digitally or on the phone or in some new media, we haven’t invented yet. That’s the core idea and I think it’s very true today.
Survey Challenges in the Modern Era
Wow. I got a mail survey the other day from an automotive company. I bought a car for one of my children from the old used vehicle. But I got – I won’t name the company that sent it out, a household name, and they sent me a dollar to fill in the survey. 300 questions. 300 questions right? It was 48 actually, but 45 too many. And by the way, random receipt. I mean I got it, I don’t know, 3 or 4 months after the purchase experience. And then the other survey I got as I was walking out of the door, actually, I didn’t actually even go there, I did it all online with my daughter, was “make sure you give us a 10” governing, you know, “make sure you give us a 10 on the survey.” And so I think it’s got a bad name, but we have an opportunity through video, voice messaging and ideas and other great technology now that we can leverage. But let’s talk about Net Promoter Score again, and let’s talk about journey, Net Promoter Score customer journey, because I think we’ve got a lot of people wound around the axle examining phases of journey. The transaction itself, the free transaction, the experience, the demo experience whatever it may be. And I think there are a lot of our customers here, and it’s coming up in the chat, who are really focused on how do I capture the results of the journey, and how do I think about the customer journey?
Beyond NPS: Rethinking Customer Journeys
Before we get to the meat of what we want to get into, which is beyond NPS. Yeah, I think the classic – The real question in the journey is did it give the customer what they wanted, in a time frame and an amount of effort and with kindness and a trustworthy behavior. And how do you get both sides of the equation? Both the mechanical, it was on time and it did what I thought and it made me feel good about the experience. I want to do it again.
Blending Mechanics and Emotions
I do think there is a need for some emotional gauge, and Net Promoter when asked at the right time, how likely you’d recommend? That gives you a sense that you’ll never get with just the mechanics. I’ll give you a quick experience. One of your clients who was kind enough to talk with me for my book project, Warby Parker, said: We asked Net Promoter a few times throughout the journey of the relationship, and then we connect it with data that’s from our operating systems. For example, was the shipment on time? Were the glasses delivered within 48 hours of the order? And that’s how they’ve been able to figure out: Where is the threshold for wow? Because you have to be remarkable. Not everywhere, but you have to choose strategically, how are you gonna wow a customer and get them talking to their friends and remember themselves that you’re a special supplier? And it’s that – It’s a nice mixture of operational together with survey. I’ll come up with a better name than survey, but that’s simple three questions and I think that’s the future for journeys.
Engagement and Passion for the Movement
Well, let’s talk about the future though, for Net Promoter Score, beyond Net Promoter Score, and I think you’ve got a better turn of phrase to capture this. But before I get to that, some of the comments, again, from our customers in the chat is that you’ve been out there some considerable time, right? But you’re still as engaged, maybe more passionate and engaged than ever, about this movement and persistent and very persistent in this point of view, where does that come from?
The Philosophy Behind Net Promoter System
You know, when I started the Net Promoter system, I was going to name it something quite different. It was going to be Net Lives Enriched. Because there’s a philosophy, I probably got it from my parents, but who knows where it came from. I think every time you touch a life, you either enrich it or diminish it. And that’s the core of this Net Promoter. Promoters are people whose lives have been enriched, detractors have had their lives diminished. And I think as an individual, as a team member, as a company, we need to have that philosophy front and center, that purpose. So I think I’m committed to it because it’s so much more than a certain score. It’s a scorecard of every time we touch a life, are we living up to that golden rule of loving our neighbor and enriching a life? And that’s what inspires people. It’s so much more than did I satisfy you? I mean, satisfaction isn’t how you get success in a business. People don’t talk about you, it’s not remarkable. That’s just enough. I got what I paid for. Net Promoter is about enriching a life, and people feeling the love. And that’s what inspires employees, not survey scores. Right.
Impressive Brands and Best Practices
And the whole employee dimension is a whole other topic we should talk about. But everybody knows a brand or two where they feel they’ve been given innovative new value. They’ve had a fabulous experience, they’ve had a great service or a great product. And it’s always an invidious question to ask, but I have to ask. It’s always controversial. You might not want to name the brand, you might talk about categories, but who are some of the best practice brands that you can think about or what domain are they in? If you don’t want to say the name?
Exemplary Brands and Thoughtful Practices
Oh, I’m happy with names. In fact, because I’m in this book writing process, I’ve gotten approvals from most people to say things. So I continue to be deeply impressed by Apple, my son still works at Apple, my daughter in law. They continue to learn and improve and get better. Amazon is really good and has embraced Net Promoter in a very impressive way. But some of the companies that our listeners might not have heard of, California Closets is one of the most thoughtful practitioners. I’m on the board of their parent company, so, you know, full disclosure, but I also was a customer, and they came and put in some closet – They built out some closets in my Florida condo. And they were done faster than they thought, and instead of just rushing out the door for a long coffee break, the team lead said: Is there anything around here we can help you with? We finished early.
The Right Way to Run a Business and Life
And I’ve been having this horrible experience with a kitchen counter that was out of level and stuff kept rolling off and crashing on the floor. He said: Oh, we can fix that for you. And you think, wow. When does that happen? And I could see the young guy who was the helper, he looked at his boss like he’d lost his mind and I heard him talking and went down the hallway, he said, that’s the right way to run a business. Always watch for opportunities to really wow a customer and make their life better. And then he turned and said something, I’ll always remember, he said: And that’s the right way to run a life.
Tools for Leading the Right Life
So I think what we’re providing with these tools is a way to help employees and leaders lead the right life. Wow. So let’s then talk about employee for a moment. Again, building up the suspense around the future of Net Promoter Score, and saving that for the last segment. And we’re going to keep running through some great questions that are building up here. We probably won’t get to all of these questions, but we’ll find a way to get back to everybody after the event here; this is a live event.
The Role of Employees and Their Tools
So, let’s talk about the employee, how the employee fits into this, and how we think about employees. Because, to my mind, we still see companies giving their customers the equivalent of an iPhone, and giving their employees telex and fax machine to do their job. Obviously, that’s not quite accurate; it’s a kind of caricature of life, but that’s how it feels sometimes. I feel like I’m dealing with somebody who is an earnest, hard-working individual that wants to have and create a great experience for me as a customer, but somehow they just don’t have the same insight and the same tools to give feedback to their employer. I think this is the key.
Measuring Success in B2B and B2C
It’s not just measuring how you’re doing with a customer; it’s doing that in a way that inspires your employees to learn and take action, not to argue about, “Oh, you know, in Japan, nine doesn’t mean the same thing as a seven.” If they really care about delighting their customers and enriching lives, that stuff is really secondary. But then you have to give them tools to help. I’ll go back to California Closets because I got the approval. I sent to the executive who runs California Closets: Is it okay to use this story? They said: Oh Fred, of course. In fact, they did the first case at the Harvard Business School a couple of years ago for California Closets. It was all about Net Promoter, the first Net Promoter case ever at Harvard, amazing. And he said: But Fred, this is not unusual. Don’t think of this as a story. I’ve got 1000 stories like this.
Net Promoter 3.0 and the Future
For instance, in our CertaPro painting division, we have a list; every painting team has a list of things to wow their customers so that when they get an opportunity, for example: if they’re painting a high atrium in your stairway, before they take the ladders away, they say: Can we change the light bulbs in your chandelier? That’s incredibly thoughtful. Or when they do the front door, they’ll offer to polish up the brass knocker. These little favors that are acts of kindness, they’re not manipulative, they’re just helping employees remember that they should be looking for ways to do something special and make that customer’s life better because that’s not just good for the company, it’s good for the employee. That’s how you lead the right life. And that’s the link I think we need. And with the digital tools we have today, it’s so powerful to link both feedback and helping your people, testing and innovating. The reason I love, and I’ve always loved, the Medallia system and Apple, is because the feedback shows up on my son’s phone, almost instantly. You know, it’s for the employee, not just the bosses at headquarters. Wow, that’s a great point of view. Now we have some super questions building up in the chat.
Addressing Skepticism and Looking Ahead
One that we see often is, I think this is interesting, I’d love to hear your point of view. Do you see the strategy for Net Promoter Score being different for B2B versus B2C? I think in B2B, you have to think very carefully about what it means to enrich a life. What does it mean to live up to the golden rule of loving your customer? And of course, it’s the company level as well as the individuals or teams you’re working with. For me, that the way that I know I’ve succeeded with a client. Put myself in a Bain situation. If I have made that person I work with more successful, so that they can then treat their customers, their employees better, then I’ve succeeded in my task. And so it’s exactly the same idea, but instead of just making one person happy, you have a cluster or a community of workers, leaders, and vendors who have to feel like I am pleased that I made the choice to work with you. Well, I think that’s a great point of view. I do think essentially, what we’re saying, look, it’s the same. There’s perhaps a different dialogue inquiry process to get to the truth, but it’s as powerful and relevant in any environment, B2B or B2C, as well the future, of course, which we’re going to get to shortly.
Exploring NPS 2.0 and Customer Effort Score
And there’s a great question on that we’ll come to, NPS 2.0, they called it. There’s another great question that comes up frequently, customer effort score next to NPS. Is there value in that? Boy, I think we’re asking too many questions of too many customers today. I’d ask the vital few, and make sure we’re acting on 100% of those before I’d add a fourth, a fifth and a sixth question. Now, if I saw effort in the verbatim comments of dozens and dozens of my most important customers, yes, I could see adding that in and saying that is a vital dimension we need to keep a special eye on. But the notion that generally that is how you love someone – How many people would say that was so remarkable. I have to tell my friends about it? Because it wasn’t that hard. Sometimes it’s a shock, but I think that’s more in a –
That’s just table stakes. We need to do more than that. We need to rise above and have customers feel the love. I absolutely agree. Now, there is a great question here: Net Promoter scores high, There is skepticism within your company about it being artificially elevated. How can you build trust in the metric? And I think, look, you know, there’s digital technology today that we can leverage, there are many people that do simple measurements and I understand the skepticism, but the technology is there, right? To look at those two or three core questions that we have to ask and to create a valid metric around it. If you actually look at the NPS index, there’s no accident. If you look at the value and the trended value of those companies, there’s a public NPS index out there, If you look at that and Net Promoter Scores, there’s a clear correlation. So, I think that’s a great question.
The Future of Net Promoter Score – Net Promoter 3.0
I’d like to focus us now though, on what someone is calling here Net Promoter Score 2.0. And so, I’d like to talk about the future of Net Promoter Score, and how we’re thinking about that, and how can people learn more about the evolved thinking of the late 21st, or the second decade of the 21st century, I should say. Yeah, there’s a chapter in my new book called Net Promoter 3.0, so I agree that there is a new – A whole new set of best practices and standards that we need to incorporate. But step one I think is to stop doing the bad stuff. I feel wonderful that, I think two-thirds of the Fortune 1000 now use Net Promoter or say they do, but I think most of them use it quite poorly. They get a tiny fraction of the full potential of doing this system because of unintentional, well-intentioned big mistakes. They use a survey-based score and then turn it into a target, which destroys it as a useful measure for learning. It doesn’t inspire people if they’re scared; they’re not going to hit the target. And I think the auto business is a classic. Dealers get in trouble if they don’t get a certain score, but you know, surveys were not meant for that purpose. What’s meant for that purpose are accounting numbers, and you do need to hold people accountable to accounting metrics.
And so over the last several years I’ve been working very hard to build a Net Promoter 3.0 that includes a sister metric to Net Promoter, which is not a survey metric but is an accounting metric. It’s called Earned Growth. And it just basically takes all of your growth, How much is coming for customers who are coming back for more, and referring their friends. And the guts of that has been used in many industries, they call it Net Revenue Retention Rate. We know how to measure that, the tricky one was: how do we know what’s coming from our existing book of business and their referrals and recommendations? That’s hard to track. And so I’ve been working with one of your teams, and shout out to Elizabeth Carducci and Akash Bose, who have worked with Bain teams to help us come up with a practical process to keep track of how much of our new customer business is coming through referral and recommendation. Not some fuzzy market research process, but let’s keep track of every customer and ask them when they come on board: What’s the primary reason you chose us? And when it’s a recommendation referral or even ratings, when it’s honest ratings, that business needs to be attributed to treating your existing customers with love. And that Earned Growth Rate, I think, together with Net Promoter, is going to help us get into this next wave of progress in Net Promoter 3.0.
Discussing Net Promoter 3.0 and Earned Growth
I love that, and we did flash up a cover of the book there. So this is a way to get to grips with Net Promoter 3.0, but earned growth, and the value of referrals, and as we’re trying to get across here, the value of referrals can be calculated. The way referrals work can all be understood. We have the technology now, that perhaps even five years ago that we didn’t have, to make that assessment and I think the key thing is we’re in an opportunity here where the best brands in the world, some of the biggest and best brands in the world are just beginning that journey to realize and capture the value of referrals.
Employee Perspective: Earned Loyalty
Let’s go back to the employee, so if earned growth is the customer way of looking at things, is the employee way of looking at things, earned loyalty? Is that how we think about it? This is a great question and you know, that book is called Winning on Purpose. Loving customers – it’s the unbeatable strategy of loving customers. When you inspire your employees, And I should say that book, you can preorder it on Amazon, even though it’s not completely done yet, but that preorder on Amazon guarantees you get the fastest copies on Earth. Winning on Purpose argues that when leaders put their employees in a position to enrich the lives of their customers, That is how you inspire employees and actually help them build lives of meaning and purpose themselves. Because it’s that act of service of really enriching a customer’s life, that’s the wonderful thing in business. It’s one of those rare chances where in a structured, consistent way, you can actually change the lives of your customer and make them better. And when you do a great job at it, they give you tens and you get recognized and rewarded. And it’s that cycle.
Yes, you got to have happy employees, But happy employees, you can overpay them, you can give them vacation whenever they want, You can say no, you don’t have to deal with that difficult, demanding customer, and those are all bad things. The kind of happy employee has to be an earned happiness, which comes through making your customer’s life so much better that they want that for all – They’ll tell their friends and their colleagues and It’s a subtle but it’s an important difference. So I think it is really dangerous to measure employee happiness without also measuring how they feel about you, putting them in a position to enrich the customer’s lives, and make them proud.
Connecting Purpose and Impact
Well, I think there’s a lot of chat around leading the right life and that powerful, really, really potent phrase that you used earlier. But I think there’s a great opportunity here, thinking about earned loyalty, how do we look after our employees and give them the environment to do what you just described, but also to have that sense of purpose? You know, to realize why is it we’re here. I’m here to be a software builder and run software companies and help people achieve their goals. Recognizing what you’re here to do is important isn’t it? And I think we have a duty to help our teams recognize what we’re really here to do. And sometimes it’s really simple, isn’t it? It’s a really simple thing. I went for a car ride with Truett Cathy, the guy that founded Chick-fil-A, and he said: Fred, Southern Baptists in this part of the country, We have this tradition of picking a verse from the bible to be our life’s verse. And mine is – I’m not so good. It’s a proverb. I can’t remember the chapter and verse, but it’s essentially that a good name is worth more than silver or gold. And I thought, boy, that is exactly right. Your reputation is everything. And when you touch a life and you enrich it, that makes your reputation go up, and when you diminish it, it goes down. And then he put it in the simplest terms, he said: Some people don’t like the bible, or they have a mixed relationship with it. So I get my energy from helping people solve problems and create smiles. And that was the basis of Net Promoter. How many smiles of all the people I touch, How many smiles did I create? How many frowns? And I do think, it sort of trivializes it if you turn it into cute little character smiles, but when you think about it, are you making the world a better place or aren’t you? That’s what you’re measuring. And when you make that clear to an employee, it becomes clear that this is meaningful, This is a big deal. Brightening people’s days, your customers, your colleagues or darkening them, this is what we’re put on earth to do. Some of my colleagues at Bain say: Fred, you really messed up. NPS doesn’t stand for Net Promoter Score, it stands for Net Purpose Score. If your purpose is to enrich the lives you touch, then those smiles or frowns or promoters and detractors are just a way of turning this fundamental, biblical, philosophical idea into a science, and I really like that. It’s very cool.
Balancing Enriching Lives and Making Business Decisions
We’ve got time for a couple of quick questions here. A few more if we could. A great one, if you have 20 minutes, and let’s imagine you have two minutes. The person he was saying you have 20 minutes to convince the board that the customer experience is vital, institutionalized, digitizing it is vital, but it’s really, you don’t get 20 minutes. You get them in the first 1,620 seconds, right? Yeah. For the chapter five of my book, Winning on Purpose will show you evidence that in every situation where we can measure Net Promoter across an industry, the company with the highest Net Promoter Score measured thoroughly, correctly. Not with clickbait balogna, but really done carefully. That company is delivering the highest total shareholder return to investors over the past decade. So since I wrote The Ultimate Question 2.0 with Rob Markey, we’ve taken all those companies and more where we know the Net Promoter leader in an industry, and we found that their total shareholder return is more than triple their industry average rate. So there is very powerful evidence that this customer – This is not just one approach to winning. It appears unless you’ve got a monopoly, or some network effect, I think Facebook would be an interesting example of someone who has gone beyond the norm. But if you want to compete in the normal world, it looks like the only way you can deliver superior returns to your investor, is to make your customers feel the love.
Applying Net Promoter Score in Municipalities or Utilities
Well, that actually relates to another great question, which is if you are a municipality or a utility, any advice for using Net Promoter Score and what’s the value of it? There’s definitely a benchmarking value, But what’s your view on that? Yeah, I think you go back with the hospital. I had this cancer experience. I’m still alive, luckily, but the people I worked with in the hospital sort of liked this Net Promoter idea, but Promoter sounded a little corny. What they liked was Net Lives Enriched. And I think if you convince the policeman, the fireman, the healthcare workers, it’s helping you know, when you’re enriching life and when you failed, and it’s doing it in a non-threatening way where you can learn and get better. That inspires people. So then it’s, How can I help you learn how consistently you’re enriching the lives you touch and how can you get better? I think every employee wants that, If it’s put in the right context.
Right, I totally agree. I think I’ve got one more here, and Michael, tell us if we’ve got time, How do you suggest an employee balance enriching people’s lives, versus making good business decisions? I think we know the answer to that, which is, it’s all the same, isn’t it? Yes, and yet I like to think of making money is a constraint. You have to earn a fair profit, or the whole business collapses. And I think the trickier one often is: How do I not just kill myself as an employee and work infinite hours and wreck my home life, in the duty of making my customer’s life better? How do I get that balance? And that’s a tricky one, and I think the right way to deal with that is a huddle-based approach where you make sure those frontline teams are talking to each other, raising issues if things are out of whack and they can’t hold it together, you know, they’re not imbalanced, then you get the group helping them succeed. That’s the toughest part of the equation, because I think once you convince people that your mission in life is to enrich the lives you touch, and customers primarily, then you got to make sure as a leader, you keep them healthy and balanced and sustainable. Sustainable profitably, sustainable with just their human balance in life.
Well, that’s a great way to finish the conversation, Fred. It’s wonderful to see you, it’s great to see over there in Cape Cod. This has really been great fun, we’ve had a ton of questions from our customers. I’m sure we’re gonna be able to highlight this again and again and people will be able to access this conversation. Let’s look forward Winning on Purpose coming out. Let’s get the pre-orders on Amazon as well. I can’t wait to read the book,
Fabulous to see you, Fred.
Thank you Leslie.
